Are you looking to buy a home soon? Curious on what the important steps are? We here at Corken + Company are excited to lend a helping hand. Here are some helpful steps to get you ready to purchase that dream home.
Decide Whether You’re Ready To Buy A Home:
Buying a house is a major commitment. Before you begin shopping for properties or comparing mortgage options, you need to make sure you’re ready to be a homeowner.
Let’s look at some of the factors that lenders and homeowners alike should consider.
Income And Employment Status
Your lender won’t just want to see how much money you make. They’ll also want to see a work history (usually about 2 years) to make sure your income source is stable and reliable.
Debt-To-Income Ratio
Debt-to-income ratio (DTI) is another financial instrument mortgage lenders use to evaluate your loan application. Your DTI helps your lender see how much of your monthly income goes to debt so they can evaluate the amount of mortgage debt you can take on.
Liquid Assets:
Even with the help of a mortgage, you’ll still need liquid assets to fund the purchase of a home, specifically your-
Down payment:
Buying a home with no money down is possible, but most homeowners need to have some cash for a down payment. A down payment is the first major payment you make on your loan.
Closing costs:
You’ll also need to pay for closing costs before you move into your new home. Closing costs are fees that go to your lender and other third parties in exchange for creating your loan.
Calculate How Much House You Can Afford:
Once you decide you’re ready to buy a home, it’s time to set a budget. A good place to begin is by calculating your DTI ratio. Look at your current debts and income and consider how much money you can reasonably afford to spend each month on a mortgage.
Homeownership comes with several costs you don’t need to worry about while renting. You’ll need to pay property taxes and maintain some form of homeowners insurance. Factor these expenses into your household budget when you decide how much house you can afford.
Get Preapproved For A Mortgage:
When you’re ready to start house hunting, it’s time to get preapproved for a mortgage. When you apply, your lender will give you a preapproval letter that states how much you’re approved for based on your credit, assets and income. You can show your pre approval letter to your real estate agent so they can help you find homes within your budget.
Find The Right Real Estate Agent For You:
There are multiple parties involved when getting a mortgage and buying a house. Your real estate agent is your representative in the home purchase transaction. Your agent will look out for your best interests by finding homes that meet your criteria, get you showings, help you write offers and negotiate. As a buyer, you can usually work with a real estate agent for free. In most cases, the seller will pay the buyer’s real estate agent’s commission. The commission is usually 3% of the purchase price.
A real estate agent represents you and helps you understand how to buy a house. Your agent will show you properties, write an offer letter on your behalf and assist in negotiations. Real estate agents are local market experts and can also advise you on how much to offer for each property.
Begin House Hunting:
Your real estate agent will help you hunt for houses within your budget. It’s a good idea to make a list of your top priorities, some of which might depend on whether you’re looking for a starter home (one you’ll be in for a couple years or so) or forever home (one you can picture yourself in for a long time).
Here are some things you might want to consider when shopping for a house:
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Price
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Square footage
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Home condition and possible need for repairs
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Access to public transportation
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Number of bedrooms
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Backyard/swimming pool
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Local entertainment options
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Local school district ranking
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Property value trends
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Property/real estate taxes
Make An Offer On A House:
When you decide to make an offer on a home, you must submit an offer letter in writing. Your offer letter includes details about yourself (like your name and current address), the price you’re willing to pay for the home and more. It will also include a deadline for the seller to respond to your offer.
Get A Home Inspection:
Lenders usually don’t require a home inspection to get a loan, but you should still get an inspection before you buy a property. During a home inspection, an inspector will go through the home and specifically look for problems. They will test electrical systems, make sure the roofing is safe, make sure appliances are working and much more. After the inspection closes, the inspector will give you a list of problems they found in the home. When you receive your inspection results, go over each item line by line and look for major issues. Apply online for expert recommendations with real interest rates and payments.
Get A Home Appraisal:
A home appraisal is a review that gives the current value of the property you want to buy. You must get an appraisal before you buy a home with a mortgage loan.
Lenders require appraisals because they can’t lend out more money than a home is worth. If the appraised value comes back lower than your offer, you might have trouble getting financing. Be thoughtful about your offer and consider contesting the results of the appraisal if you believe the appraised value is too low.
Ask For Repairs Or Credits:
After you view your inspection results, you might want to ask your seller to correct some of the problems you found. You can do this in one of three ways:
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Ask for a discounted purchase price considering the results.
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Request that the seller give you credits to cover some of your closing costs.
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Ask that the seller have the problems fixed before you close.
Close On Your New Home:
Your lender is required to give you your Closing Disclosure, which tells you what you need to pay at closing and summarizes your loan details, three days before closing. Read through your Closing Disclosure and make sure the numbers don’t vary too much from your Loan Estimate, which you would have received three days after your initial application. Once you’ve reviewed your Closing Disclosure, it’s time to attend your closing meeting. Bring your ID, a copy of your Closing Disclosure and proof of funds for your closing costs.
You’ll sign a settlement statement, which lists all costs related to the home sale. This is when you pay your down payment and closing costs. You’ll also sign the mortgage note, which states that you promise to repay the loan. Finally, you’ll sign the mortgage or deed of trust to secure the mortgage note.
It can feel like there are a lot of elements when it comes to buying a home. We here at Corken + Company believe in “Real Estate Solutions Without Limits” and can make this process easy and fun!
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